Written by Utah Senator Mike Lee and Rusty Cannon
Thankfully, President Biden’s recently released FY 2024 budget proposal is dead on arrival in the United States Congress. However, taxpayers nationwide should pay close attention to the details contained in the budget. The tax proposals paint a revealing picture of what the Biden administration would do with unchecked power.
Frankly, it is shocking how disconnected from economic reality many of the proposals are. The proposals would pile massive new taxes on everyone and bring US tax rates far out of step with the rest of the globe.
The total tax hikes amount to almost $4.7 trillion in new taxes over the next 10 years, most of which would target businesses and the ultimate “political boogeyman” – high-income individuals. The major pieces include higher tax rates on corporate, individual and capital gains income, a complicated new minimum tax on unrealized capital gains for the wealthy, and higher Medicare taxes.
Let’s take a look at the major pieces in detail:
Increase the corporate income tax rate from 21% to 28%
Tax Hike: $1.325 Trillion
This proposal would make the US corporate tax rate higher than any major global trading partner. The US would have the second highest combined tax rate for the OECD of 32.2%, which would be surpassed only by Columbia at 35%. One must remember that corporations do not pay income tax. They only remit the tax. While there is always a populist appeal to raising taxes on corporations based on the misunderstanding that the burden is somehow only felt by a small number of rich “fat cats,” one needs to remember the facts and resist efforts that have no basis in economic reality. Higher corporate taxes come right out of the cash that would otherwise be used for higher wages for workers, hiring more employees, creating new jobs, and making investments to grow businesses.
Double the GILTI tax rate from 10.5% to 21%
Tax Hike: $1.160 Trillion
Although less well-known to the average taxpayer, the GILTI tax (Global Intangible Low Tax Income) is an onerous burden on multi-national corporations. It was a poorly designed part of the 2017 federal TCJA tax package. Instead of fixing it, the Biden administration wants to double down on this failure and further hammer unintended industries and businesses. As with corporate taxes, this will come out of the pockets of workers and consumers in the form of higher prices, lower wages, and fewer jobs.
Create a 25% “billionaire minimum tax” to tax unrealized capital gains for the rich
Tax Hike: $436.6 Billion
If we were to fashion an award for these proposals titled “Biggest Bonehead Idea,” this would win it by a country mile. This is next to impossible to implement, let alone enforce, and is likely unconstitutional. Take for example, a recent executive at the now-famous Silicon Valley Bank. On Thursday they might have increased their net worth by hundreds of millions of dollars. On Friday afternoon, their net worth was zero. This idea is laughable.
Raise the top individual income tax rate to 39.6% and raise extra capital gains taxes for those making more than $400,000
Tax Hike: $885.6 Billion
They are ignoring the fact that most small businesses in the United States pay income taxes on the individual level, and this tax hike would hit small businesses everywhere. But the Biden Administration has apparently decided that those making over the magical number of $400,000 per year are evil and need to pay more.
Tax capital gains at ordinary income tax rates for taxpayers making over $1 million
Tax Hike: $213.9 Billion
We wouldn’t want high-income taxpayers feeling left out. Biden’s budget proposal gives them another reason to move their assets to another country.
If all of these proposals in President Biden’s budget aren’t eye-opening enough, one can take heart in the fact that these numbers don’t take into account the upcoming expiration of virtually all of the tax cuts in the 2017 Tax Cuts and Jobs Act. Although Presidential administration budgets rarely go into effect, they provide a window into the priorities of what would be done in the absence of opposition from the other side of the aisle.
Thankfully that opposition exists.